We’re Confident Builders Will Like This Story

Now here’s a nice way to start the new year: Builders now have more confidence in new home construction than they have in close to five years.

According to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) for January, builder confidence in the market for newly built, single-family homes rose four points to 25.

That’s the fourth straight month of improvement and the highest level the index has achieved since June of 2007.

“Builders are seeing greater interest among potential buyers as employment and consumer confidence slowly improve in a growing number of markets, and this has helped to move the confidence gauge up from near-historic lows in the first half of 2011,” said David Crowe, NAHB Chief Economist.

“That said, caution remains the word of the day as many builders continue to voice concerns about potential clients being unable to qualify for an affordable mortgage, appraisals coming through below construction cost, and the continuing flow of foreclosed properties hitting the market.”

Each of the three HMI component indexes increased for the fourth straight month:

*The component gauging current sales conditions rose three points to 25, which is its highest point since June of 2007.

*The component gauging sales expectations in the next six months rose three points to 29, its highest point since September of 2009.

*The component gauging traffic of prospective buyers rose three points to 21, its highest point since June of 2007.

The HMI also went up in all regions of the country this month, even the one that includes Chicago real estate, though modestly: The Midwest increased one point to 24; The South rose two points to 27; the West jumped five points to 21 and the Northeast surged nine points to 23.

“Builder confidence has now risen four months in a row, with the latest uptick being universally represented across every index component and region,” said Bob Nielsen, chairman of the National Association of Home Builders.

“This good news comes on the heels of several months of gains in single-family housing starts and sales, and is yet another indication of the gradual but steady improvement that is beginning to take hold in an increasing number of housing markets nationwide — and that has been shown by our Improving Markets Index. Policymakers must now take every precaution to avoid derailing this nascent recovery.”